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Hong Kong Sells Land Below Estimates on Rising Supply

May 02, 2012

Hong Kong’s new home sales jumped more than twofold in March from a month earlier. Photographer: Jerome Favre/Bloomberg

Hong Kong’s new home sales jumped more than twofold in March from a month earlier. Photographer: Jerome Favre/Bloomberg

Hong Kong’s government sold land in one of the city’s most exclusive areas for less than analysts estimated, underscoring developers’ concerns that increased housing supply and slowing global growth may stall home prices.

The winning bid for the site near Repulse Bay Road, in the Island South district, was HK$1.67 billion ($215 million), the government said in a statement yesterday. That’s equal to HK$39,673 a square foot, according to Centaline Property Agency Ltd., the city’s biggest closely held realtor. The site, with a total buildable area of 42,000 square feet, was expected to fetch HK$1.68 billion, or HK$40,000 a square foot, according to the median estimate of five analysts surveyed by Bloomberg News.

Leung Chun-ying, who in July will take over as Hong Kong’s new leader, has vowed to increase housing supply to quell public discontent over a widening wealth gap in the world’s most expensive place to buy a home. Hong Kong’s home prices have gained more than 78 percent since early 2009 on record low mortgage rates and an under-supply of new units.

“Developers and investors’ expectations have changed,” Ringo Lam, a director in the valuation department of AG Wilkinson & Associates, said before the tender results were announced. “I don’t think anybody would expect prices to go up 20 to 30 percent every year like they have been for the past few years.”

Tai Cheung Holdings Ltd., (88) a Hong Kong-listed developer, bought the site, Simon Lee, a director of the company, said by phone today. A total of 10 offers were received, according to yesterday’s government statement, which didn’t identify the winning bid.

Wealthy Neighbors

Repulse Bay is home to some of the city’s richest people including billionaire Cheng Yu-tung of Chow Tai Fook Jewellery Group Ltd. (1929) and gambling tycoon Stanley Ho.

The area has developed around the site of the former Repulse Bay Hotel, built in 1920 and demolished in 1982, and featured in the 1955 Hollywood romantic drama Love Is a Many- Splendored Thing, with William Holden, and Coming Home, the 1978 film starring Jane Fonda and Jon Voight. Ernest Hemingway stayed at the hotel in the 1940s before going to cover the war in China. Marlon Brando was a guest in the 1950s.

China’s growth slowed more than forecast last quarter to the least in almost three years, as exports and domestic demand cooled. Gross domestic product in the world’s second-biggest economy expanded 8.1 percent from a year earlier after an 8.9 percent gain in the fourth quarter.

Investors should avoid Hong Kong property stocks because home prices may slow after Leung’s pledge to build more housing, according to CLSA Asia-Pacific Markets, a unit of Credit Agricole SA. Still, prices may rise 8 percent in the next 12 months, CLSA analyst Nicole Wong wrote in an April 19 report.

Index Gains

The Hang Seng Properties Index (HSP), which tracks the city’s seven biggest developers, fell less than 0.1 percent at 11:48 a.m. in Hong Kong. It has gained 13 percent this year, compared with the 15 percent advance in the benchmark Hang Seng Index. (HSI)

Chief Executive-elect Leung said last month he doesn’t see signs of overheating in the property market, reassuring investors concerned that he would introduce polices hurting developers.

“I’m not going to bring down prices, rents artificially through government actions,” Leung told reporters at a briefing in the city on March 28. “Affordability will not catch up with prices quickly.”

The government yesterday said it also sold a site in the city’s northern Tuen Mun district for HK$180 million, to Billion Ideal Ltd. The winning bidder can build as much as 3,608 square meters of residential floor area on the site.

Repulse Bay

The developer of the Repulse Bay site will probably build low-rise apartments on the site, according to AG Wilkinson’s Lam. Prices for the units may go for about HK$44,000 a square foot in two to three years, he said. New units in the area currently sell for about HK$35,000 to HK$40,000, he said.

Hong Kong’s luxury home prices fell 2.2 percent in the first quarter from three months earlier to HK$18,730, as mortgage restrictions imposed by the government on properties over HK$10 million reduced demand for those units, according to a report by Colliers International.

Savills Plc said Hong Kong is the world’s costliest place to buy an apartment, with prices about 55 percent higher than London, where the property broker is based. Moscow is 7.4 percent more expensive than London and New York is 15 percent cheaper, Savills said.

Hong Kong’s new home sales jumped more than twofold in March from a month earlier, reaching a 14-month high, according to the Land Registry.

To avoid the formation of an asset bubble, the government has imposed curbs since 2010 including additional taxes on home transactions and higher minimum mortgage down payments. At least a third of Hong Kong’s luxury home buyers in 2011 were from mainland China, according to Centaline.

To contact the reporters on this story: Kelvin Wong in Hong Kong at; Shai Oster in Hong Kong at

To contact the editor responsible for this story: Andreea Papuc at

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